2.Global trends and underlying forces determining the progress on the world IC sector

2.1. Reforms of IC sector - evolution of legislation and regulations 2.2. Motive technological forces shaping evolution processes

in ICT - Microprocessors - Photonics2.3. Megatrends in ICT - Digitalization - Mobile communications - Grows of Internet - Convergence of services/networks/devices2.4. Crisis in IC sector - Manufacturers - Operators - Manias

2.1. Reforms of IC sector - evolution of legislation and regulations

• Liberalization• Privatization

# Liberalization (in general) - weakening or total rejection of state control over all types of economic activities and commercial parameters

# Liberalization in telecom sector - the transition from a monopoly market structure to a competitive environment and resulted in tectonic shifts in telecommunications industry

# 15 years ago the majority of telecommunications companies in the world were under strong state control.

# Second half of 90s – beginning of liberalization in telecom sector of European countries, accompanied by privatization

A. Steps of IC sector’s reform

Process’ steps

Privatization

Privatizationand liberalization

Liberalization

Implications

• Government sells all or part of its shares (either private or public IPO)

• Provision of incentives to investors

• Combination of both approaches to increase efficiency of incumbent and to introduce competition

• Allowance of competitors into the market

• Incumbent remains owned by government but are submitted to competition

ICT sector’s reform

Incumbents

New players

Source: McKinsey

Market-based reforms onthree ways

B. Significant impact on access infrastructureTeledensity growth: Change in teledensity* in different countries

between 1996 and 2000

Upper-high income developed countries

Lower-high income developedcountries

Emerging countries

Developing countries

+54

+21

+48

+53

+13

+20

+26

+3+5 +5

No reform

Privatization only

Liberalization+Privatization

* Fixed plus mobile lines per 100 population

Source: ITU, EMC, WEFA, McKinsey

GDP for each GoC

B. Significant impact on access infrastructure (Cntd)

• Developing and power countries – great difference in results

• Countries that have pursued privatization have had much higher growth rates in teledensity in comparison with countries without reforms

• Countries that have pursued full reform – privatization plus liberalization have much more increases

• Most of this growth was concentrated in mobile access

C. Reform’s impact on the Internet penetration

• Access availability• Prices• Competition• Enabled lines• Choice of services• Interconnection conditions

Internet user intensity

Developed

Lower income developed

Emerging

Developing

54

27

13

39

16

8

39

17

1

64

12

1 +63

+38

+31

+41

Lowest in group

Group median

Highest in group

Source: ITU, EMC, NielsenNet Ratings, World Economic Forum, McKinsey

Early beginning of the liberalization

D. Reform’s levers:

• Access availability

• Degree of price competition

• Choice of services

• Interconnection regime for Internet and data services

• Percent of fixed and mobile access lines enabled for Internet use

E. Interact with other ICT market’s dimensions

• PC/ITV penetration, tariff policy • Examples: # US – selection of fees’ options for local calls - no data interconnection fees

# In most countries dial-up Internet is metered and surfers pay per minute

• Flat rate Internet users have been more likely to adopt broadband technologies • The importance of these details will keep ICT sector’ reform in a central role in the future

F. Some critical issues of IC sector’s reform

• Government aggressively tries to use a reform to get huge revenue – shares’ and licenses’ overcharges

• Example: 3G Licenses

• In Germany were sold 6 licenses for a total of 50 billion Euro (2001)

• The total worldwide market volume for mobile networks of 50 to 55 billion Euro in 2002 and 2003.

•The license fee in Germany - 558 Euro/inhabitant (Auctions) At Norway only 10 Euro per/inhabitant (Contest)Such a low investment on the other hand will make an operator profitable in a short time.

*Estimated

Source: BITKOM; Basis: UMTS Forum

UMTS license costs per 2x5 MHz band (in million Euro)

4270

3543

1224

619419

272 23866 33 12

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1000

2000

3000

4000

5000

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3G Licenses: average cost/inhabitants

G. Reform of IC sector: demands for regulation authorities

• Promote access - fixed and wireless - not hinder it• Promote broadband technologies - fixed or wireless• Create the guidelines for a stable environment for technological

developments• Invest through governmental institutions in modern technologies (e.g.

e-government)• Propel reliable tax conditions• Negotiate at least comparable conditions between the countries• Self-regulation of the market price (regulated by market, not by

governmental institutions

H. Motive forces of reform in IC sector

1. Technological progress – growing productivity of microprocessors

progress in fiber optic communications systems

highly effective methods of compression and transportation of information

• Networks with unlimited resources

• Variety of services

• Decrease of communications services costs

H. Motive forces of reform in IC sector (Cntd)

2. Globalization – different forms of activities, which were previously carried out at local or regional levels are presently being carried out in a continental and world scale

• Old concept of globalization – physical exports of goods

• The new dimension in globalization today – entertainment, media and world financial markets on a global scale

• The key technology in today’s world of global media and finance is ICT technology with the need for global standards and access to technology.

•Globe becomes "global village" (Marshall McLuhan)

•New tendency - Glocalization

3. Digital divideAccess to telephone, radio, TV, Internet, satellite

Digital divide = Telecom divide (2000)

H. Motive forces of reform in IC sector (Cntd)

Digital divide, 2003

Digital divide, 2003 (Cntd)

Table 1. World Data Profile Indicators 1999 2002 2003 Fixed lines and mobile telephones (per 1,000 people) 234.2 363.8 405.7 Personal computers (per 1,000 people) 69.1 100.8 .. Internet users (per 1,000 people) 58.7 130.9 149.9 Population, total, billion 6.0 6.2 6.3 GNI per capita, Atlas method (current US$) 5,060.0 5,130.0 5,510.0 Table 2. Data profile for group of countries with high income Indicators 1999 2002 2003 Fixed lines and mobile telephones (per 1,000 people) 960.3 1,249.7 1,267.5 Personal computers (per 1,000 people) 341.6 466.5 .. Internet users (per 1,000 people) 186.8 364.2 376.8 Population, total, billion 0.948 0.967 0.972 GNI per capita, Atlas method (current US$) 25,910.0 26,570.0 28,600.0 Table 3. Data profile for group of countries with low income Indicators 1999 2002 2003 Fixed lines and mobile telephones (per 1,000 people) 20.4 39.4 55.7 Personal computers (per 1,000 people) 3.6 6.9 .. Internet users (per 1,000 people) 1.5 8.1 16.2 Population, total, billion 2.1 2.3 2.3 GNI per capita, Atlas method (current US$) 380.0 400.0 440.0 Table 4. Data profile for group of least developed countries Indicators 1999 2002 2003 Fixed lines and mobile telephones (per 1,000 people) 6.3 17.7 24.2 Personal computers (per 1,000 people) 2.1 4.2 .. Internet users (per 1,000 people) 2.0 4.0 13.5 Population, total, billion 0.619 0.660 0.675 GNI per capita, Atlas method (current US$) 280.0 290.0 310.0

Indicators describing a level of penetration of different IC services